Correlation Between Cronos and Wrapped Bitcoin

Can any of the company-specific risk be diversified away by investing in both Cronos and Wrapped Bitcoin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cronos and Wrapped Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cronos and Wrapped Bitcoin, you can compare the effects of market volatilities on Cronos and Wrapped Bitcoin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cronos with a short position of Wrapped Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Wrapped Bitcoin.

Diversification Opportunities for Cronos and Wrapped Bitcoin

0.16

Correlation Coefficient

Cronos  Wrapped Bitcoin

Average diversification

The 3 months correlation between Cronos and Wrapped is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and Wrapped Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrapped Bitcoin and Cronos is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cronos are associated (or correlated) with Wrapped Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrapped Bitcoin has no effect on the direction of Cronos i.e., Cronos and Wrapped Bitcoin go up and down completely randomly.

Pair Corralation between Cronos and Wrapped Bitcoin

Assuming the 90 days trading horizon Cronos is expected to under-perform the Wrapped Bitcoin. In addition to that, Cronos is 1.4 times more volatile than Wrapped Bitcoin. It trades about -0.02 of its total potential returns per unit of risk. Wrapped Bitcoin is currently generating about 0.04 per unit of volatility. If you would invest  6,928,895  in Wrapped Bitcoin on August 12, 2024 and sell it today you would earn a total of  732,006  from holding Wrapped Bitcoin or generate 10.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cronos  vs.  Wrapped Bitcoin

Cronos

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wrapped Bitcoin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped Bitcoin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Wrapped Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cronos and Wrapped Bitcoin

The main advantage of trading using opposite Cronos and Wrapped Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cronos position performs unexpectedly, Wrapped Bitcoin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wrapped Bitcoin will offset losses from the drop in Wrapped Bitcoin's long position.

The idea behind Cronos and Wrapped Bitcoin pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.